What’s Wrong With the Bottom Half of Americans?

Last year the Federal Reserve noted that U.S. household net worth hit a record $109 trillion in the third quarter.

It took a dip in the fourth quarter – thanks to the stock market sell-off – but almost hit $109 trillion again in the first quarter due to the subsequent rebound.

In a June 11 op-ed column in The New York Times, however, David Leonhardt points out that the combined net worth of the poorer half of U.S. households is negative, which means their debts are worth more than their assets.

You got that right. A full half of Americans have a negative net worth.

Leonhardt concludes that “the American economy isn’t working for the majority of Americans” and then endorses Senator Elizabeth Warren’s slew of anti-business proposals to remedy the situation.

I’ll constrain myself here, otherwise I’m likely to go on a rant like Rick Santelli did a decade ago when he blew a gasket live on the floor of the Chicago Board of Trade. Santelli was responding to the idea floated by the Obama administration that taxpayers should bail out millions of Americans who – having bought more house than they could afford – were underwater on their mortgages.

Let’s start with Leonhardt’s claim that “the American economy isn’t working for the majority of Americans.”

We’ve just witnessed four quarters of 3%-plus GDP growth. Inflation is MIA. Unemployment is at a 50-year low. Household income is at a record high. And U.S. household net worth is at another high.

It’s not that the American economy isn’t working. It’s that more than 100 million Americans are not exercising basic financial responsibility.

They are not working, not saving or not living within their means.

Let me make my standard disclaimer here. I take no issue with anyone in this situation due to mental or physical disabilities or truly horrendous luck.

Our capitalistic society creates an astonishing array of desirable products and services. That doesn’t mean you should buy them if you can’t afford them.

Yet millions of Americans are living paycheck to paycheck and maxing out their credit with unpaid Visa and Mastercard balances, home equity loans, and other consumer loans.

That is their choice, of course. But they pay a heavy price in stress, anxiety and insecurity.

That’s unfortunate. But as Robert Louis Stevenson famously said, “Sooner or later everyone sits down to a banquet of consequences.”

What should irk readers, however, are the editorialists and politicians who claim the problem is something other than a lack of personal responsibility. They insist that the American economy is broken and needs to be fixed.

Wrong. It’s bad financial decisions that need fixing. And only the people making them can remedy that situation.

The rest of us should recognize the demagogues who – seeing an enormous voting bloc that makes up a full half of the country – promise to stick business owners, investors and taxpayers with the tab.